For companies that want to improve their chances of staying out of trouble, better than encouraging whistleblowers is to foster a culture in which employees can express their concerns and be engaged in addressing them. Wendy Addison, a whistleblower who shed the light in 2000 on fraud and corruption in LeisureNet Ltd., whose joint chief executives were convicted of fraud in one of the biggest corporate scandals in South Africa, talks about how firms can encourage a speak-up culture and better protect whistleblowers against retribution. Ms. Addison now runs the consultancy SpeakOut SpeakUp to help companies avoid the slippery slope of misconduct.

What is speaking up in the context of corporate compliance?

Ms. Addison: Whistleblowing takes an individual into a legal framework, and it comes up after the horse has bolted. The whole narrative around whistleblowing is very emotive and it is natural for people to feel psychologically conflicted because it goes against our natural propensity to loyalty. The act of speaking up and listening up happens before there is a need for whistleblowing; it's about getting ahead of the slippery slope, before the misconduct cascades into business as usual.

As good as loyalty is, we need to consider that in terms of speaking up there’s a much more important value to put in front of that--and that’s fairness. It’s kind of rejigging the hierarchy of one’s values. Speaking and listening up is a behavior and it’s much more effective if we can train individuals into having what I call courageous conversations, before they have to stray into the mire of whistleblowing territory.

What can companies do to encourage employees to speak up?

Ms. Addison: An organization can empower individuals through training, to engage in what I call courageous conversations, which is speaking and listening up—it’s the dialogue rather than the outcome. You cannot just say to someone, 'See something say something;' that’s a pantomime of caring. They remind people of their willingness and good intention but don’t take into account the difficulty of doing that.

In a group dynamic, we change our behavior, we are vulnerable to situations and influence. It’s important that organizations support a culture of psychological safety by flattening hierarchy, reducing power differentials. When developing formal whistleblowing processes, a company must not make this a 10-page document to stick on the back of its employee handbook. You have to humanize the process, to make it personal by, for instance, giving out the name of people who will be operating the hotline, the name of the compliance officer and general counsel and of the human resources officer in charge.

What is needed to ensure those speaking up within a company are listened to and protected?

Ms. Addison: If you look at the major scandals, there are always people speaking up. The issue is we find it hard to listen to bad news that can trigger our own sense of self-efficacy, especially if you are a leader. When you speak up the chain of command and your manager thinks, 'Why didn’t I see that, I now look like a fool,' then instead of escalating the problem they become guardians of these real problematic issues. Organizations are reluctant to invest in mid-management and leaders’ development, especially when it comes to being the recipient of bad news.

The hard thing about listening up is mustering the courage and selflessness to act on the information you are receiving. Per harassment, even if whistleblowing rules are being drawn around anti-retaliation, the reality is that these are so difficult to measure. It’s difficult to prove that is retaliation or link it to harassment, but it speaks to the culture and climate of an organization.

Is there compliance without ethics?

Ms. Addison: Compliance should be a monitoring tactic rather than a prevention measure. We want to get ahead of these issues rather than come up with a big stick and punish everybody. The incident at United Airlines [physically removing a passenger from a flight] is a perfect example of relying on the rules and regulations. People should be able to solve problems and make decisions in their own capacities.

We ought to be careful of the culture of tick-boxing. We have to educate employees...and it has to be about understanding the vulnerability to situations and context. Compliance officers and legal counsels are reluctant to engage with 'speak up and listen up,' and when they do it is in very technical terms. We have to understand we’re talking about behavior and not mechanics.

What kind of incentives should be given to those who blow the whistle?

Ms. Addison: The reward system is built on the premise that people will act in a self-interested manner, that the only way to get people to do the right moral thing is to pay them. I don’t believe in that. I do agree with compensation for the whistleblower. There are so many hoops and obstacles that whistleblowers have to climb through..but if you got this big fancy reward at the end of it, it is still used as a stick to beat you up, for people to say you only did it for money.

Any compensation should be for the loss of your career, the loss of any earning you might have as a professional person. Organizations can build rewards into appraisal systems…rewards for speaking up to a leader who was able to act effectively on the bad news. That kind of thing needs recognition.

What can be done to minimize the usually harsh consequences on whistleblowers?

Ms. Addison: We have to go back to not talking so much about whistleblowing but talking about courageous conversations. There is a lot of research being done on how to get whistleblowers who lost their careers back into work. I, for one, never worked as an accountant again. The reality is professionals are blacklisted, it’s not everybody who will be able to get on the speaking circuit or write successful blogs.

Write to Mara Lemos Stein at mara.lemos-stein@wsj.com. Follow her on Twitter at @LikelyMara.